- EUR/USD holds lower ground, snaps four-day uptrend near fortnight top.
- DXY benefits from covid woes, ignores Treasury yields pullback.
- US GDP backs Fed’s resistance to discuss tapering, Core PCE Price Index may challenge easy-money policies.
- German GDP, US infrastructure spending updates should be observed too.
EUR/USD edges lower around the intraday bottom of 1.1879, down 0.05% on a day, heading into Friday’s European session. The major currency pair marked a four-day uptrend the previous day when poking the monthly high marked on July 06. However, the risk-off mood put a safe-haven bid under the US dollar and triggered the DXY rebound from the monthly low afterward.
US President Joe Biden recently pushed White House staff to either take the vaccine jabs or welcome routine covid tests as the US registers the highest daily infections since February. The conditions are murkier in Japan where the government is planning to take few more prefectures under emergency after recording over 10,000 daily cases for the first time. It’s worth noting that the latest coronavirus numbers are a bit easy from Australia and the UK but aren’t suggesting any improvements in the Delta covid strain woes.
In addition to the rush to risk-safety, the US Dollar Index (DXY) also benefits from the reflation fears as the Fed’s preferred inflation gauge, PCE Core Price Index for June is up for printing higher-than-previous figures of 3.7% YoY. On the same line, US inflation expectations recently jumped to the highest since early June and exert additional pressure on the US central bank to roll back easy-money policies.
Read: US Core Personal Consumption Expenditure Price Index June Preview: Bad will not be bad enough
Alternatively, US Senators are up and running towards the President’s next stimulus, which in turn challenges the market bears. As per Reuters, “The US Senate on Thursday prepared to tackle the details of a $1 trillion bipartisan infrastructure bill backed by President Joe Biden, with the possibility of weekend work looming after lawmakers agreed to advance the measure.”
Furthermore, softer-than-expected GDP and cooling of housing data, not to forget recently rising US Jobless Claims, add to the US dollar’s upside barriers.
On other hand, European Central Bank's (ECB) Vice President Luis de Guindos and ECB Strategy Meeting Accounts favored mildly strong inflation while staying cautiously optimistic over growth numbers. Hence, any disappointment in the preliminary readings of German and Eurozone Q2 GDP should offer extra weakness to the EUR/USD. However, US data and risk catalysts become more important to follow for fresh impulse.
Technical analysis
Bullish MACD signals back the EUR/USD pair’s breakout of a six-week-old resistance line, now support around 1.1850. However, of 200-day EMA and 61.8% Fibonacci retracement (Fibo.) of late March-May upside, near 1.1920, challenges the pair buyers. Hence, the pair’s short-term moves may turn out less impressive until staying between 1.1850 and 1.1920.
